Using Criminal Law Remedies to Assist Asset Recovery: A UK Perspective

The criminal procedure 'tool-kit' is an underused, powerful and sometimes advantageous route to disgorge assets obtained by fraud.

This lecture sets out the remedies and options available to private litigators who have suffered losses by dishonesty.

Click here to download the presentation.

Libya Asset Freeze Update: Firms Must Obtain HM Treasury Permission to Transact with Newly Prohibited Entities

HM Treasury has substantially added to its list of Libyan Asset Freeze Targets (click here for the explanatory post).

A number of UK and international companies involved in perfectly lawful trade with Libya (mainly in the hydrocarbon sector) have now found that they are unable to obtain payment for their goods and services.

Before carrying on with trade or engaging any debt recovery strategy, it is vital that any supplier, firm, fund, deposit taking institution or body with a financial relationship checks that they are not dealing with one of the prohibited entities listed below. Breaching the terms of the asset freezing provisions is a criminal offence which carries a prison sentence.

The Treasury operates a license regime which permits innocent companies to conduct business with these listed entities on a basis agreed by the HMT Asset Freezing Unit.

Contact Chambers for advice and assistance on how to apply for a license and how to seek commercial recovery; firms cannot conduct business or settle outstanding obligations without the correct authorisation. It is vital that companies do not receive funds which are restrained by the UK State as per its commitment to the United Nations Security Council.

The full list contains all the prohibited individuals and entities; the names listed below are just a selection.

  1. AL-INMA HOLDING CO. FOR CONSTRUCTION AND REAL ESTATE DEVELOPMENTS
  2. AL-INMA HOLDING CO. FOR INDUSTRIAL INVESTMENTS
  3. AL-INMA HOLDING CO. FOR SERVICES INVESTMENTS
  4. AL-INMA HOLDING COMPANY FOR TOURISM INVESTMENT
  5. ASHTON GLOBAL INVESTMENTS LIMITED
  6. AZZAWIA REFINING (a.k.a Azawiya Refining)
  7. BAROQUE INVESTMENTS LIMITED
  8. BREGA
  9. CAPITANA SEAS LIMITED (c/o Trident Trust Company (BVI)
  10. CENTRAL BANK OF LIBYA (CBL)
  11. DALIA ADVISORY LIMITED
  12. ECONOMIC AND SOCIAL DEVELOPMENT FUND (ESDF)
  13. FIRST GULF LIBYAN BANK
  14. GADDAFI INTERNATIONAL CHARITY AND DEVELOPMENT FOUNDATION
  15. GUMHOURIA BANK
  16. HAROUGE OIL OPERATIONS (a.k.a (1) Harough, (2) Veba Oil Libya GMBH)
  17. JAWABY PROPERTY INVESTMENT LIMITED
  18. KINLOSS PROPERTY LIMITED
  19. LAP GREEN NETWORKS(a.k.a. LAP Green Holding Company)
  20. LIBYA AFRICA INVESTMENT PORTFOLIO
  21. LIBYAN AGRICULTURAL BANK (a.k.a (1) Agricultural Bank (2) Al Masraf Al Zirae (3) Al Masraf Al Zirae Agricultural Bank)
  22. LIBYAN ARAB AFRICAN INVESTMENT COMPANY (LAAICO)
  23. LIBYAN ARAB AIRLINES
  24. LIBYAN FOREIGN BANK
  25. LIBYAN HOLDING COMPANY FOR DEVELOPMENT AND INVESTMENT
  26. LIBYAN HOUSING AND INFRASTRUCTURE BOARD (HIB)
  27. LIBYAN INVESTMENT AUTHORITY (a.k.a Libyan Arab Foreign Investment Company (LAFICO))
  28. LIBYAN JAMAHIRYA BROADCASTING CORPORATION
  29. LIBYAN NATIONAL OIL CORPORATION
  30. MABRUK OIL OPERATIONS
  31. MEDITERRANEAN OIL SERVICES COMPANY (a.k.a Mediterranean Sea Oil Services Company)
  32. MEDITERRANEAN OIL SERVICES GMBH (a.k.a (1) MED OIL Office Duesseldorf (2) MEDOIL)
  33. NATIONAL COMMERCIAL BANK
  34. NATIONAL OIL FIELDS AND TERMINALS CATERING COMPANY
  35. NATIONAL OIL WELLS AND DRILLING AND WORKOVER COMPANY(a.k.a (1) National Oil Wells Chemical and Drilling and Workover Equipment Co. (2) National Oil Wells Drilling and Workover Equipment Co.)
  36. NORTH AFRICAN GEOPHYSICAL EXPLORATION COMPANY (NAGECO)
  37. RAS LANUF OIL AND GAS PROCESSING COMPANY (RASCO)
  38. SABTINA LTD
  39. SAHARA BANK
  40. SIRTE OIL COMPANY
  41. TAMOIL AFRICA HOLDINGS LIMITEDa.k.a Oil Libya Holding Company
  42. TEKXEL LIMITED
  43. WAATASSIMOU FOUNDATION
  44. WAHA OIL COMPANY
  45. ZUIETINA OIL COMPANY (ZOC)

How the UK Government Froze Gaddafi's Assets (Updated)

[Updated 18 March 2011 - pursuant to UN Resolution 1973]

[Updated 20 April 2011 - see here:]

We have been asked how the UK has managed to freeze Col. Gaddafi and his family's assets absent domestic or international criminal proceedings.

Faisal Osman and Penny Small explain.

On 26 February 2011, the UN Security Council "Unanimously adopted resolution 1970 (2011) under Article 41 of the Charter’s Chapter VII". The Resolution said this about 'asset freezing:'

Asset Freeze

“(17).  ....(the UNSC) decides that all Member States shall freeze without delay all funds, other financial assets and economic resources which are on their territories, which are owned or controlled, directly or indirectly, by the individuals or entities listed in Annex II of this resolution or designated by the Committee established pursuant to paragraph 24 below...

...or by individuals or entities acting on their behalf or at their direction, or by entities owned or controlled by them,

...and decides further that all Member States shall ensure that any funds, financial assets or economic resources are prevented from being made available by their nationals or by any individuals or entities within their territories, to or for the benefit of the individuals or entities listed in Annex II of this resolution or individuals designated by the Committee;"

“(18).  Expresses its intention to ensure that assets frozen pursuant to paragraph 17 shall at a later stage be made available to and for the benefit of the people of the Libyan Arab Jamahiriya;"

Further details can be found here: in a UN press release.

The Order in Council

Using the Queen's unique power conferred on her by section 1 of the United Nations Act 1946(a) (which provides for UN resolutions to be passed into domestic legislation without having to go through Parliament) and with the advice of her Privy Council, The Libya (Financial Sanctions) Order 2011 became an 'Order in Council'.

Statutory Instrument No.548 of 2011 was drawn up.  As of 27 February 2011, it is now a criminal offence in this jurisdiction to:

3(1) "deal with funds, other financial assets or economic resources owned or controlled, directly or indirectly,

(a) a designated person;

(b) an individual or entity acting on behalf, or at the direction, of a designated person;

(c) an entity owned or controlled by a designated person,

if P knows, or has reasonable cause to suspect, that P is dealing with such funds or economic resources.

(2) In paragraph (1) “deal with” means—

(a) in relation to funds and other financial assets

(i) use, alter, move, allow access to or transfer;

(ii) deal with the funds or financial assets in any other way that would result in a change in volume, amount, location, ownership, possession, character or destination; or

(iii) make any other change that would enable use, including portfolio management; and

(b) in relation to economic resources, exchange or use in exchange for funds, goods or services.

Note that the offence is one of 'knowledge and suspicion'.

Breaching the prohibitions contained these provisions can, in the worst case, result in a prison sentence of 2 years. Confiscation provisions may also apply.

Management of Frozen Funds

The Treasury may give authority to deal with frozen funds under licence:

9(2) A licence must specify the acts authorised by it and may be

(a) general or granted to a category of persons or to a particular person,

(b) subject to conditions;

(c) of indefinite duration or subject to an expiry date.

(3) The Treasury may vary or revoke a licence at any time.

And:

(5) A person commits an offence who, for the purpose of obtaining a licence, knowingly or recklessly—

(a) provides information that is false in a material respect, or

(b) provides or produces a document that is not what it purports to be.

(6) A person who purports to act under the authority of a licence but who fails to comply with any conditions included in the licence commits an offence

Reporting obligations of relevant institution

Article 11; the 'information provisions' are very important:

"(1) A relevant institution must inform the Treasury as soon as practicable if—

(a) it knows, or has reasonable cause to suspect, that a person—

(i) is a designated person, or

(ii) has committed an offence in breach of the prohibitions or license

(b) the information or other matter on which the knowledge or suspicion is based came to it in the course of carrying on its business."

In the worst case scenario, a person who acts in breach of the information provisions may be sentenced to 3 months imprisonment. Confiscation provisions may also apply.

Are there any Other Relevant Provisions/Prohibitions/Duties?

Yes. The entire breadth of the Order has not been explored here;anyone who may be subject, directly or indirectly to these provisions must seek advice and must consider the whole of the Order.

Who does The Order Apply to?

The relevant articles of the Order apply to any person in the UK or any person elsewhere who is:

(a) a British citizen, a British overseas territories citizen, a British Overseas citizen, a person who under the British Nationality Act 1981 is a British subject, a British National (Overseas) or a British protected person; or

(b) a body incorporated or constituted under the law of any part of the UK including a Scottish partnership.The Order therefore applies to banks, financial institutions, charitable organisations and non-governmental organisations in the UK or established under UK law.

The Order does not apply to subsidiaries of UK companies operating wholly outside the UK and which do not have legal personality under UK law.

Is there any Guidance from HM Treasury?

Yes, and it is quite useful. Click here: to read the 'Financial Sanctions Notice'

Who are the 'Designated People' subject of the Prohibition?

1. QADHAFI, Aisha, Muammar DOB: 1978 POB: Tripoli, Libya. Other Information: Daughter of Muammar Qadhafi.

2. QADHAFI, Hannibal, Muammar DOB: 20 September 1975 POB: Tripoli, Libya. Other Information: Son of Muammar Qadhafi.

3. QADHAFI, Khamis, Muammar DOB: 1978 POB: Tripoli, LibyaOther Information: Son of Muammar Qadhafi.

4. QADHAFI, Muammar, Mohammed, Abu Minyar DOB: 1942 POB: Sirte, Libya Other Information: Leader of the Revolution, Supreme Commander ofArmed Forces.

5. QADHAFI, Mutassim DOB: 1976 POB: Tripoli, Libya Position: National Security Adviser Other Information: Son of Muammar Qadhafi.

6. QADHAFI, Saif al-IslamDOB: 25 June 1972. POB: Tripoli, Libya Position: Director Qadhafi FoundationOther Information: Son of Muammar Qadhafi.

How can the Order be Challenged?

Resolution 1970 says nothing about how its measures can be challenged. There is a provision for the sanctions to be kept under "continuous review" but no further guidance has been set down.

The domestic Order does not specify any license review or appeal mechanism; decisions may be subject to Judicial Review. Any criminal prosecutions would be subject to the criminal appeal process.

18 March 2011 Resolution 1973

In passing a resolution authorising a 'no fly zone' the UN Security Council re-affirmed Resolution 1970 as well as other provisions. Importantly, it extends the asset freeze to funds controlled directly or indirectly by 'the Libyan authorities'. The full text reads:

"19. [The Council] Decides that the asset freeze imposed by paragraph 17, 19, 20 and 21 of resolution 1970 (2011) shall apply to all funds, other financial assets and economic resources which are on their territories, which are owned or controlled, directly or indirectly, by the Libyan authorities, as designated by the Committee, or by individuals or entities acting on their behalf or at their direction, or by entities owned or controlled by them, as designated by the Committee, and decides further that all States shall ensure that any funds, financial assets or economic resources are prevented from being made available by their nationals or by any individuals or entities within their territories, to or for the benefit of the Libyan authorities, as designated by the Committee, or individuals or entities acting on their behalf or at their direction, or entities owned or controlled by them, as designated by the Committee, and directs the Committee to designate such Libyan authorities, individuals or entities within 30 days of the date of the adoption of this resolution and as appropriate thereafter;

20. Affirms its determination to ensure that assets frozen pursuant to paragraph 17 of resolution 1970 (2011) shall, at a later stage, as soon as possible be made available to and for the benefit of the people of the Libyan Arab Jamahiriya;

21. Decides that all States shall require their nationals, persons subject to their jurisdiction and firms incorporated in their territory or subject to their jurisdiction to exercise vigilance when doing business with entities incorporated in the Libyan Arab Jamahiriya or subject to its jurisdiction, and any individuals or entities acting on their behalf or at their direction, and entities owned or controlled by them, if the States have information that provides reasonable grounds to believe that such business could contribute to violence and use of force against civilians;"